german business network (gbn)€™s retail market is expected to nearly double to us$ 1 trillion by...
TRANSCRIPT
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March 7, 2017
German Business Network (GBN)Webcast - India presents its new Union Budget 2017-2018: Impact on German companies
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Your hosts today
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
Dirk EgbersPartnerGlobal Leader of the German Business Network (GBN)
Phone: +49 211 9352 18500Mobile: +49 160 939 18500Mail: [email protected]
Aashish KasadPartnerDirect Tax
Phone: +91 226 192 0630Mobile: +91 9820 346073Mail: [email protected]
Sanket DesaiSenior ManagerIndirect Tax
Phone: +91 226 192 1753Mobile: +91 98206 36375Mail: [email protected]
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I. India’s attractiveness
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
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India’s attractiveness (1/4)
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
“A Bright spot”
Fastest growing economy in the world
3rd most attractive Foreign Direct Investment destination
Largest youth population in the world with more than half the population below 25 years of age
To grow at consistently higher rates (>7%) and retain its position as one of the fastest growing economies till 2020
Significant jump by 12 places in Ease of Doing Business rankings between 2014 and 2015
‘Make in India’ to raise the contribution of the manufacturing sector to 25% of the GDP by the year 2025 from its current 16%.
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India’s attractiveness (2/4)
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
By 2020, India expects to be among the top three pharmaceutical markets in terms of incremental growth
Indian chemical industry is the 3rd largest producer in Asia and 8th largest worldwide
Automobile
Pharmaceuticals
By 2026, India expects to be the 3rd largest automotive market by volume in the world
Aviation
By 2020, India expects to be the 3rd largest aviation market
Renewable energy
India has the 5th largest power generation portfolio in the world
Chemicals Telecommunication
In March 2016, with a subscriber base of nearly 1058.86 million, India accounted for the second-largest telecom network in the world
Automotive
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India’s attractiveness (3/4)
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
►Third-largest agricultural producer by value behind only China and the US.
►Among the 15 leading exporters of agricultural products in the world
►It is expected that India will become 5th largest consumer market in the world by 2025
►India’s retail market is expected to nearly double to US$ 1 trillion by 2020 from US$ 600 billion in 2015
►India is expected to become the world’s fastest growing e-commerce market
Agriculture Defense manufacturing
► India has the third largest armed forces in the world
► 60% of defence related requirements are met by imports which offers a huge opportunity for import substitution
Consumer Products and Retail
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India’s attractiveness (4/4)
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
►India has the fourth largest rail freight carrier in the world and has the largest passenger carrier
►Indian Railways envisages a prospective investment of USD 130.76 billion in the next five years
IT-BPM sector accounts for 56% of the total global outsourcing market
IT and BPM Textiles
► Second largest textile manufacturing capacity globally
► 5% share in global textiles and apparel trade
► India accounts for 18% of world's spindles and 9% of world's rotor
Railways
Source: makeinindia.com, ibef.org
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II. Key macro economic indicators
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
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Key macro economic indicators – India continues to be a bright spot
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
Several domestic and international historic economic and political developments – Brexit, US Elections, GST constitutional amendment, Demonetization, move towards digital economy
Growth rate estimates for 2017 and 2018: IMF - 7.2%/ 7.7% and World Bank 7.6%/7.8
Fiscal deficit target at 3.2% of GDP for FY 2017-18 and at 3% for the following year
Consumer price inflation declined from 6% in July 2016 to 3.4% in December 2016
Industrial production rose by 5.7% in Nov 2016 fastest in 13 months
Foreign exchange reserves at highest ever levels of USD 361 billion (as on January 2017)
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III. India Budget 2017
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
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Key policy announcements (1/3)
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
The Union Budget 2017 revolved around the theme of ‘Transform’, ‘Energize’ and ‘Clean’ India
Ten distinct themes:
Theme Additional allocation to the Long Term Irrigation Fund INR 200 billion Dedicated Micro Irrigation Fund - an initial corpus of INR 50 billion Dairy Processing and Infrastructure Development Fund - corpus of INR 80 billion over 3 years New mini labs for soil sample testing
FarmersFocus on doubling farmers’ income in five years
Aim to bring 10 million households out of poverty Target to complete 10 million houses by 2019 for the houseless 100% village electrification by May 2018 Mason training to 0.5 million by 2022 Budget allocation for rural agriculture and allied sectors increased by 24%
Rural sectorEmphasis on rural employment and infrastructure
IT platform to be launched for atleast 350 online courses 100 India International skills centers to be established to offer advanced training and courses
in foreign languages Next phase for Skills Strengthening for Industrial Value Enhancement to be launched at
INR 40 billion Scheme to boost employment in leather and footwear to be announced Launch of Incredible India 2.0 to promote tourism and employment
YouthEnergizing them through education, skills and jobs
Key policies announced
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Key policy announcements (2/3)
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
Theme
Various policies announced for strengthening social security, health care and affordable housing
Poor and Un-derprivileged
Railways policies announced with focus on safety, capital works and cleanliness Expert international assistance will be harnessed to improve safety preparedness and
maintenance practices Railway lines of 3,500 kms will be commissioned in 2017-18 To feed solar power at 7,000 railway stations Bio-toilets at railway stations and coaches Railways to provide end to end transportation for select commodities through partnership with
logistics players Emphasis on Metro rail in India – New Metro Rail Policy to be announced Increase budget allocation by 10% for highways To set up Strategic Crude Oil Reserves Developing an eco-system to make India a global hub in electronics manufacturing
InfrastructureEfficiency, productivity and quality of life
Key policies announced
Various policies announced for effective governance and efficient service delivery through people’s participationPublic Service
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Key policy announcements (3/3)
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
Theme
Various policies announced for growth and stability through stronger institution e.g. ► FIPB to be phased out;► process of registration of financial intermediaries to be made fully online;► Cyber security - Computer Emergency Response Team to be established for financial
sector
Financial sector reforms
Digital Mission to be set up with a target of 25 billion digital transactions in FY 2017-18
Target to achieve high speed broadband connectivity on optical fibre in more than 150,000 gram panchayats
Digital economy For speed, accountability and transparency
Key policies announced
Optimal deployment of resources and preserve fiscal stabilityPrudent Fiscal Management
Objective to increase the tax base, promote digital economy and move towards e-assessmentsTax AdministrationHonouring the honest
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Key direct tax proposals – corporate tax rates
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
Particulars Current effective rate1
(Upto AY 2017-18)
Proposed effective rate1
(AY 2018-19)Domestic company:A. Where total turnover or gross receipts
in FY 2015-16 ≤ 500 million #► Income > 10 mn, but <100 mn► Income > 100 mn
33.06%34.61%
27.55%2
28.84%
B. Optional tax rate for new manufacturing companies set up/ registered on or after 1 March 2016 (s.115BA)
► Income > 10 mn, but <100 mn► Income > 100 mn
27.55%28.84%
27.55%28.84%
C. Other companies ► Income > 10 mn, but <100 mn► Income > 100 mn
33.06%34.61%
33.06%34.61%
Company other than domestic company ► Income > 10 mn, but <100 mn► Income > 100 mn
42.02%43.26%
42.02%43.26%
MAT rate for domestic companies:A. Unit in International Financial Service
Centre solely earning in forexB. Others
► Income > 10 mn, but <100 mn► Income > 100 mn► Income > 10 mn, but <100 mn► Income > 100 mn
9.92%10.38%20.39%21.34%
9.92%10.38%20.39%21.34%
A. DDT rate under section 115-OB. Buyback tax rate under section 115QA
20.36%23.07%
20.36%23.07%
1. With applicable surcharge and 3% Education Cess 2. Tax rate reduced from 30% to 25% (surcharge unchanged)
Mn = Million
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Key direct tax proposals – concessional rates and foreign tax credit
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
Particulars Proposals in budget (applicable from FY 2017-18)
Income from transfer of carbon credits
► To be taxed at concessional tax rate of 10% (plus surcharge and cess) on the gross amount
► Benefit of the concessional 5% tax rate on interest on foreign currency borrowings to be extended on loans taken before 1 July 2020
Interest on foreign currency borrowing
Foreign tax credit
► Foreign tax credit in respect of foreign tax under dispute to be given by the Assessing officer
► Proof of settlement to be furnished within 6 months from the end of the month in which the dispute is settled
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Key direct tax proposals – capital gains
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
Particulars Proposals in budget (applicable from FY 2017-18)
Conversion of preference shares to equity
► Conversion of preference shares to equity prospectively not chargeable to tax
► Period of holding of preference shares to be included in holding of equity shares
► Cost of acquisition of equity shares to be cost of acquisition of the preference shares
Capital gains rate on transfer of unlisted securities
► Reduced capital gains rate of 10% chargeable to non-residents on transfer of unlisted securities
► Applicable from FY 2012-13
Foreign company demerger – cost of acquisition to resultant foreign company
► Cost of acquisition of shares in an Indian company transferred pursuant to foreign company demerger shall be available to the resulting foreign company
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Key direct tax proposals – promoting digital economy
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
Restriction on cash receipt
Particulars
► Restriction on cash receipt of > INR 300,000 for a single transaction or relating to one event or occasion from a person
► Penalty equal to the amount of cash received
Proposals in budget (applicable from FY 2017-18)
Restriction on cash payment
► Cash payment exceeding INR 10,000 not eligible for deduction if incurred towards ► capital expenditure for any specified business► any expenditure► acquisition of capital assets; depreciation not to
be allowed
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Key direct tax proposals – thin capitalization and secondary transfer pricing adjustment
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
Particulars Proposals in budget (applicable from FY 2017-18)
Introduction of interest limitation rules
► Interest payment in excess of INR 10 mn by an Indian company or PE of foreign company in India towards debt issued / guaranteed by a non resident AE deductible only upto 30% of EBIDTA
► Excess interest not deductible can be carried forward for 8 subsequent AYs
Introduction of secondary transfer pricing adjustment
► Secondary adjustment introduced in cases where a primary transfer pricing (exceeding INR 10mn) has been made:
► Voluntarily by the taxpayer in the tax return ► By the Assessing officer and such adjustment is
accepted by taxpayer► As a result of an APA / MAP / safe harbour rules
► Unless the differential profits arising due to such secondary adjustment are repatriated to India within the time limit (to be prescribed), deemed to be an advance by the taxpayer to the AE and interest shall be computed
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Key direct tax proposals – others
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
Particulars Applicable from/proposal
General Anti-Avoidance Rules ► 1 April 2017
► 1 April 2016Place of Effective Management
Income-tax Computation Disclosure Standards ► 1 April 2016
Income-tax assessments► Time limits for completion of assessment reduced
► Move towards e-assessments
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Goods and Services Tax GST
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
► FM announced substantial progress towards implementation of GST
► Status-quo in Excise Duty, Customs Duty and Service Tax rates indicative of GST roll out as per schedule
► Development of GSTN also on schedule
► Extensive industry reach-out efforts planned from April 2017
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Indirect tax proposals
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
► No change in median rate of CD and ED
► Reduction in customs and excise duty rates of certain products to incentivize “Make in India” campaign (effective 2 February 2017)
► Authority for Advance Ruling for Customs, Excise and Service tax merged with the Authority under Income-tax regulations (effective from assent of the Finance Bill)
► Procedural changes - Customs
► Bill of Entry to be filed within 1 day of arrival vessel / aircraft (excluding holidays)
► Customs duty to be paid on presentation of Bill of Entry – Time limit reduced from the existing period of 2 days from date of Bill of Entry (effective from assent of Finance Bill)
► Service tax
► Effective rate of tax on services maintained at 15%
► Levy of R&D Cess repealed wef 1 April 2017
► CENVAT Credit
► Transfer of CENVAT credit in case of business transfers, sale, etc., shall be allowed within three months of receiving application (effective from 2 February 2017)
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IV. Q & A/Wrap-Up
GBN Webcast - India presents its new Union Budget 2017 (c) 2017 EYGM Limited
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